The movement of freight remains critically important for Australia’s farmers. GrainGrowers association has unveiled its National Grain Freight Strategy – a practical road map for government to help drive Australia’s global competitiveness.
GrainGrowers is a national organisation representing grain growers in Australia. Its members are farmers, and its goal is to represent growers in front of governments, industry leaders and other advocacy groups.
The strategy is designed to increase the productivity and efficiency of the supply chain, driving down costs and delivering savings for Australian growers.
Launching the strategy, GrainGrowers chair Rhys Turton said a unified and considered approach was vital to address a complex and multi-faceted issue.
“In the 2022-23 season, a record winter crop production of 65.7 million tonnes was moved from paddocks across regional Australia, by either road or rail to port for export or to domestic markets,” he said. “The expense of moving grain is the single largest cost of production, with CSIRO modelling highlighting transport costs of $2.1 billion per annum.
“Increasingly, our ability to compete on the global stage is not just determined by what we grow, but also how efficiently and effectively we can get our grain to market. For context, prior to the conflict between Russia and Ukraine, both countries production costs were $70 to $120 AUD less than Australia’s.”
GrainGrowers commissioned international consulting firm LEK to develop the Connecting the Dots report to identify key pinch points in the supply chain. Following the report, GrainGrowers consulted with more than 40 stakeholders across the supply chain to gain further input into the issues.
“By collaborating with industry stakeholders and policymakers, we’re paving the way for a more efficient and resilient grain supply chain that meets the evolving needs of Australian grain growers,” Turton said. “While growers are at the heart of the strategy, with a key focus on the issues that impact transporting grain off farm such as local roads and bridges, it is vital the approach reflects the views of the broader supply chain.
“What we have now is a clear strategy built around six key objectives, with the potential to make a real difference to the productivity and efficiency of the grain freight supply chain.”
How important is the grain industry?
The grain industry is a vital pillar of the Australian economy, delivering an average of 45 million tonnes of grain annually over the past decade and contributing an average of $15.5 billion per annum in gross value to the Australian economy.
However, high supply chain costs have a significant and direct impact on Australian grain growers and threaten the global competitiveness of the Australian grain industry.
Already facing comparatively higher costs of production, reducing supply chain costs presents a key opportunity to ensure Australian grain remains globally competitive and to deliver savings for Australian growers.
The Australian grain freight supply chain is characterised by diverse, complex and multi-directional freight journeys, often across multiple modes of transport.
From paddocks across regional Australia, grain travels either by road, rail or a combination of both, to port for export or to domestic markets such as flour and feed mills, malthouses, food manufacturers and livestock feedlots. According to CSIRO TranSIT modelling, transport costs the grain industry $2.1 billion per annum, representing the single largest cost in Australian grain production.
The past three record harvests have underscored capacity constraints within the network.
Despite having a proximity advantage to Indonesia, where sea transit times from Australia are 50-75 per cent less than transit times from Canadian and Ukrainian ports, Australia is experiencing heightened competition.
While competitors Russia and Ukraine’s wheat exports are reduced at the present due to the conflict, export volumes are expected to normalise over the medium to long-term.
Report findings
The report came to a number of conclusions to help better support the grain industry in Australia.
One was to encourage more competition and new supply chain entrants. The high cost of entry for key grain supply chain infrastructure such as rail, ports and stevedores, however, is often seen to restrict competition and deter new participants from entering the market.
The former Chair of the ACCC, Rod Sims noted the damage a bottleneck can cause.
“It is bad for the economy when bottleneck infrastructure, at the end of a crucial value chain, is in the hands of a company with unfettered market power,” he said.
GrainGrowers is concerned that the recent trend in privatising assets without adequate regulation is giving rise to monopolies that reduce efficiency, increase prices and damage the economy.
The organisation was concerned that when government privatises critical infrastructure such as ports, the process must not adversely impact competition and diminish Australia’s overall productivity and competitiveness.
GrainGrowers wants to see greater scalable capacity in the supply chain. As annual grain production fluctuates, the organisation believes scalability is important.
The past three successive record harvests highlight the limitations of the supply chain to export grain during key export windows. Exporting Australia’s grain as quickly as possible using least cost pathways following harvest is critical for capturing high international prices as Australia’s seasonal counter cyclicality presents an opportunity for Australian exporters to sell grain to international markets in times of reduced global supply.
As Australia’s national crop size continues to grow, to capitalise on higher prices, the industry’s supply chain must have sufficient capacity to handle the elevated volumes of grains in a timely and cost-effective manner. Streamlining and harmonising regulation and reducing red tape is critical to unlocking productivity according to the report.
The report states that while Australia’s transport systems have evolved from separate state-based networks, they continue to suffer from a legacy of inconsistent systems and rules.
Grain rail transport operators must navigate significant administrative burden and complexities when travelling on a route that traverses multiple rail infrastructure manager networks.
These different systems and operations create significant additional complexity and cost, which are ultimately passed onto the rail users, as well as increasing safety risks due to human error from operating across different systems and networks with varying requirements.
Streamlining current inconsistent rules, while focusing on increasing productivity will increase compliance and lower administration costs for transport operators.
A resilient infrastructure network is critical for ensuring the efficient movement of grain to market.
Repeated flood events and persistent and unprecedented rainfall have deteriorated critical road and rail infrastructure across Australia’s grain growing regions creating challenges for operators in delivering the critical commodity.
Road and rail infrastructure are long-lived investments, with roads typically having design lives of approximately 20 to 40 years. It is therefore crucial that investments are made now in building resilience to emerging issues associated with natural disasters and climate risk.
GrainGrowers want to see new technologies and innovation to support the supply chain moving forward. While the grain industry has significant legacy infrastructure, it is critical the industry continuously seeks to optimise the way things are done rather than replicate traditional modes of operation.
In addition to improving the efficiency of grain freight, new technologies can enhance safety on the road and rail network.
Autonomous freight vehicles (AFV) have the potential to significantly reduce freight costs, increase reliability and improve overall supply chain efficiency. These AFVs are nearing commercialisation, with some manufacturers predicting autonomous heavy vehicles will be on the roads as early as 2026.
Rail’s role
Increasing the amount of grain freight on rail, where possible, presents a viable, existing way to substantially reduce carbon emissions. According to the Australasian Railway Association (ARA), rail freight produces 16 times less carbon pollution than road freight per tonne kilometre travelled, valued at one cent per tonne kilometre.
ARA general manager of rail freight and heavy haul, Georgia Nicholls, said that the opportunity for rail to contribute more to the movement of grain around the country is massive.
“We need to see a much more efficient offering with timely and reliable services to meet the needs of grain growers,” she said.
“There are two main issues we have and that is the operating efficiency moving across various networks and the other is the resilience of the track to stand up to extreme weather events.
“We are very happy to see the commitment of funds to the rail network’s resilience across interstate networks and believe it will help more freight off roads and onto the rail network.”
As Nicholls explained, one of the key challenges facing rail freight is that Australia has highly localised rail networks with significant variations between states, undermining the interoperability of the network.
This lack of interoperability significantly reduces rail freight efficiency, creating extensive operational complexity that negatively impacts reliability and cycle time efficiency. This increases costs, which are ultimately borne by grain growers who receive a lower price for grain at the farm gate.
The National Grain Freight Strategy sets out short, medium and long-term priorities to ensure the continuing strength of the grain industry.
Short term strategies
Provide targeted funding to upgrade the rail network within critical freight corridors.
Harmonisation of rolling stock access agreements across rail infrastructure managers and streamline approvals to facilitate adoption of new technologies.
Conduct an audit of existing infrastructure standards and identify opportunities for standardisation and network expansion.
Provide co-funding for industry to upgrade rail sidings and loading capacity to reduce train turnaround times.
Medium term strategies
Improve metropolitan rail network access for freight trains on shared freight and passenger lines.
Jurisdictions to explore grants or leasing programs for operators on broad gauge lines to access new rolling stocks.
Jurisdictions to implement proactive rail maintenance programs with a key focus on flood resilience.
Align train control and signalling technology on the eastern seaboard.
Formalise mandatory common standards for train components between jurisdictions.
Consolidate rail freight data held by government agencies and stakeholders into a single database.
Long term strategies
Jurisdictions to identify priority grain freight routes for standardisation.
Harmonise safe working rules and systems.
Turton said GrainGrowers is proud to lead the charge in developing a comprehensive National Grain Freight Strategy.
“By collaborating with industry stakeholders and policymakers, we’re paving the way for a more efficient and resilient grain supply chain that meets the evolving needs of Australian grain growers,” he said. “While growers are at the heart of the strategy, with a key focus on the issues that impact transporting grain off farm such as local roads and bridges, it is vital the approach reflects the views of the broader supply chain.”